Blackwells Capital is reportedly pushing for big changes at Peloton, including the ouster of CEO John Foley, following last week’s multi-billion dollar selloff in the group’s stock.
Peloton Interactive (PTON) – Get Peloton Interactive, Inc. Class A Report shares extended gains in pre-market trading amid reports that activist investors at Blackwells Capital LLC called for the firing of CEO John Foley, and the potential sale of the fitness equipment maker, following last week’s multi-billion sell-off.
The Wall Street Journal first reported that Blackwells Capital, which is managed by star investor Jason Aintabi, is pressing for immediate changes at Peloton and blaming Foley for a series of mis-steps that culminated with a CNBC report on Thursday suggesting it was preparing to halt bike and treadmill production amid a ‘significant’ pullback in customer demand.
Reuters reported that Blackwells is urging Peloton to explore a sale to companies such as Nike (NKE) – Get NIKE, Inc. Class B Report, Apple (AAPL) – Get Apple Inc. Report or Disney (DIS) – Get Walt Disney Company Report.
CEO John Foley called the CNBC report, which cited an internal memo, “false”, but noted the group will nonetheless “reset” output levels and review the size of its workforce and take “significant corrective actions” to improve profits.
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“We are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company,” Foley said. “This includes gross margin improvements, moving to a more variable cost structure, and identifying reductions in our operating expenses as we build a more focused Peloton moving forward.”
Peloton shares were marked 2.6% higher in pre-market trading Monday to indicate an opening bell price of $27.76 each, a move that would still leave the stock nursing a 24% slump for the past month.
Peloton posted a net loss of $376 million for its fiscal first quarter, which ended in September, amid the slowest sales growth in more than a year and said 2022 revenues would likely come in between $4.4 billion and $4.8 billion, a $1 billion reduction from its prior forecast.
Adding to its demand woes, Peloton said the $400 price cut to its signature bike, rising freight costs and supply chain disruptions — as well as costs linked to its treadmill recall — would squeeze profit margins for the remainder of its fiscal year.
Peloton shares from its Nasdaq 100, the Nasdaq Equal Weight Index and Nasdaq ex-Technology Index benchmarks following a year in which the stock lost more than 70% of its value.
The changes are set to take place on January 24. Peloton will publish its December quarter earnings on February 8.
